Real Estate Stocks Rise Amid Rate Cut Hopes: Powell's Jackson Hole Speech Boosts Confidence

Real estate stocks have outperformed major market averages amid surging hopes for rate cuts. Federal Reserve Chair Jerome Powell's speech at Jackson Hole raised the odds of a rate cut in September. This has positively impacted the real estate sector, with stocks performing well despite the economic uncertainty.

Real estate stocks have shown significant gains, outperforming major market averages, driven by optimism surrounding potential interest rate cuts. Federal Reserve Chair Jerome Powell's speech at the annual Jackson Hole economic symposium on August 25, 2025, raised the likelihood of a rate cut in September. This positive sentiment has bolstered the real estate sector, with stocks performing well despite broader economic uncertainties.

Powell's remarks indicated a shift in the balance of risks, with downside dangers rising and tariffs posing risks of inflation. While he did not explicitly endorse a rate cut, his comments were enough to spark a rally in real estate stocks. The Dow Jones Industrial Average surged by more than 600 points following Powell's speech, and the 2-year Treasury note fell by 0.08 percentage points to around 3.71% [2].

The rally in real estate stocks was primarily driven by expectations of reduced mortgage rates, which could make homes more affordable and provide cheaper financing for Real Estate Investment Trusts (REITs). Among homebuilders, shares of D.R. Horton (DHI), Lennar (LEN), and Pultegroup (PHM) all rose by more than 3%. The S&P 500 Real Estate index (S5REAS) gained 1.9%, with Alexandria Real Estate (ARE), Prologis (PLD), and American Tower (AMT) being among the biggest contributors to the index's gain [3].

The potential interest rate cut also benefited home improvement retailers such as Home Depot (HD) and Lowe's (LOW), as well as Builders FirstSource (BLDR), which climbed by nearly 5%. The S&P 1500 Homebuilding index (.SPCOMHOME) gained nearly 4%, and the PHLX Housing Index (HGX) rose by more than 3% on the session [3].

Powell's comments come as Japan's Ministry of Finance is preparing to ramp up the interest rate it factors in for long-term government bonds to the highest level in 17 years. The reported increase in the finance ministry's assumed long-term bond interest rate, from 2.1% to 2.6%, means it would have to factor in higher debt-servicing costs. Japan, with the industrial world's heaviest public debt, is struggling to reduce spending amid growing calls for tax cuts [1].

The Fed's decision to consider rate cuts is a response to the uncertain economic environment, with Powell noting that the shifting balance of risks may warrant adjusting the policy stance. While the Fed has held its benchmark borrowing rate in a range between 4.25%-4.5% since December, the current economic conditions and the slightly restrictive policy stance allow for time to make further decisions [2].

References:
[1] https://www.reuters.com/markets/asia/japan-ramp-up-bond-interest-rate-assumption-next-annual-budget-yomiuri-reports-2025-08-21/
[2] https://www.cnbc.com/2025/08/22/powell-indicates-conditions-may-warrant-interest-rate-cuts-as-fed-proceeds-carefully.html
[3] https://www.tradingview.com/news/reuters.com,2025:newsml_L6N3UE0JF:0-u-s-homebuilders-real-estate-stocks-rally-after-powell-opens-door-to-rate-cuts/